A company budgeted unit sales of 204000 units for January 2022 and 240000 units for February 2022.The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales.If there were 61200 units of inventory on hand on December 31 2021 how many units should be produced in January 2022 in order for the company to meet its goals?

Question

Quizplus · Accepted Answer

The company needs to have 30% of February's sales in inventory at the end of January, which is 72,000 units (30% of 240,000). Starting with 61,200 units, they need to produce enough to cover January's sales (204,000) and reach the desired ending inventory (72,000). Thus, production = 204,000 + 72,000 - 61,200 = 214,800 units.

A Company Budgeted Unit Sales of 204000 Units for January